PRODUCTIVITY BARGAINING: THE EXTERNALITIES QUESTION*
| DOI | http://doi.org/10.1111/j.1467-9485.1974.tb00184.x |
| Published date | 01 June 1974 |
| Author | John T. Addison |
| Date | 01 June 1974 |
Scottish
Journal
of
Political
Economy
Vol. XXI,
No.
2,
June
1974
PRODUCTIVITY BARGAINING: THE
EXTERNALITIES QUESTION*
JOHN
T.
ADDISON
The alleged inflationary consequences
of
productivity bargaining have been
the subject of much controversy. Yet the debate
on
the external costs of
the new bargaining form is distinguished by its loose specification and a
disturbing absence of supportive factual material. The present article seeks
to redress this imbalance. Firstly, it reviews the debate
on
externalities at
source and traces the establishment of the current orthodoxy. Secondly, it
questions the statistical. theoretical and methodological bases of that ortho-
doxy. Thirdly, it presents and explains the empirical findings of a recent
investigation into the wage impact of productivity bargaining within the
Southampton local labour market over the period 1960-70 (Addison, 1971).
The study indicates that productivity bargaining innovation was not asso-
ciated with a weakening
in
the coerciveness of external comparison; that it
generated further productivity bargaining of
an
emulative and subsequently
competitive nature; and, finally, that conventionally negotiated wages
advances kept pace
with,
and in turn influenced, productivity based in-
creases. The article concludes that the practical application of productivity
bargaining highlights areas of dichotomy between policies designed to
improve industrial relations and procedures to regulate the growth of
incomes.
I
THE DEBATE
ON
EXTERNALITIES
A.
Original
Posit.Jons
The first comprehensive productivity agreement
to
be introduced within
the
U.K.
was that of the
Esso
Petroleum Company.’ The agreement,
popularly referred to as the
‘
Blue Book
’,
was implemented in August 1960
at the Company’s Fawley refinery (near Southampton).
It
was
not until 1964,
however, that comprehensive productivity bargaining came into vogue.
Over the period 1964-July 1966 some 96 agreements were negotiated,
*
I
am indebted to the Editors for their helpful advice and comments given during
the preparation
of
this
paper.
’This statement
requires
qualification in that as early as
1948
an analogous
agreement
was
reached between Standard Triumph International and the Coventry
District Committee of the Confederation of Shipbuilding and Engineering Unions.
These detailed negotiations with a single negotiating body covering the plant as a
whole leading to a revised wage structure and the reorganisation of the labour force
bear
many of the hallmarks of what are now regarded as productivity bargains.
However, the agreement was not based on estimated savings and had
an
absence
of
control systems. In the event, the agreement found no imitators at the time
(see
Turner, Clack and
Roberts,
1967,
pp.
98-99).
123
124
JOHN
T.
ADDISON
approximately
30
of which may
be
termed comprehensive. The scale and
nature of this development and the publication of two influential studies
disseminating the propaganda of productivity bargaining (Flanders, 1964;
Allen, 1964) provide a background to the cautionary evidence submitted
to the Royal Commission
on
Trade
Unions
and Employers’ Associations
by
the Confederation of British Industry (C.B.I.). Whilst admitting that
benefit might accrue to the immediate bargaining parties, the C.B.I. stressed
the dangers of plant-exported inflation in a situation
of
full
employment,
strong
trade unionism and closely integrated industry (Cunfederation of
British Industry, 1965, para. 91, p.
21).
As
a
case in point, the C.B.I. dted
the inflationary effects of the Esso
‘
Blue
Book
’
settlement
:
‘The Fawley agreement has received a certain amount of praise
in
certain
quarters but it is by
no
means universal praise
. .
.
its repercus-
sions
on
the ship repairing industry in Southampton were quite
appalling.
.
.
.
The ship repairing workers demanded the same amount
of
pay
they were getting in Fawley.’ (Royal Commission
on
Trade
Unions
and Employers’ Associations, 1965, para. 1150,
p.
258.)
The allegation that the ‘Blue Book’ agreement had established
a
coercive comparison or standard within the Southampton market
was
repeated in
a
significant discussion between Sloan, Taylor and Flanders.
Sloan
argued
:
‘
In
shipbuilding
. .
.
overtime is essential.
Once
the Fawley
Deal
was
completed,
we
got men then saying to us,
“
My friends
across
the water
have had half an hour increases2 and are
now
working less hours and
yet taking home bigger wage packets. What are you going to do for
us?”
If
we had said
“
Nothing
”,
we would have lost our labour force
very quickly; yet there was, for the shipbuilding yards, none of the
productivity gain available at Fawley. This was one clear case when
productivity bargaining at plant level had side effects in other plants
in
its area which were altogether unwelcome. and other cases
are
well
known.’
(Steel Review, 1966, p.
5.)
‘Other
cases’
were indeed reported, but at
no
time
did
protagonists of
the spill-over hypothesis provide factual material to substantiate their
allegations.
The
Esso
Petroleum Company,
in
answer
to
its critics, stressed that
productivity bargaining was an internal labour market exercise which
enabled participating
hs
to obtain the required quantity
and
quality of
labour input from among their existing stock
of
employ&. To
clarify
its
position
within
the Southampton market,
Esso
quoted the empirical
findings
of
an
8
plant inter-industry wage comparison study conducted in
May
1966. This revealed that although the Company ranked second in basic
2Under the various stages
of
the
‘Blue
Book’
agreement
(1:8:60-30:7:62)
standard hourly
earnings
increased
by
45.0
per
cent. to
48.9
per
cent.
To continue reading
Request your trial